Singapore companies are turning to mid-year salary adjustments, higher starting salaries and financial incentives such as retention bonuses and allowances to address talent and skill shortages.
Singapore, September 20, 2021 – In the face of a tight talent market and skills shortage, 3 in 4 Singapore companies are turning to financial incentives to retain talent and are offering above-market salaries for new hires.
This is according to Mercer’s Hiring and Retention Survey which surveyed over 150 companies across 13 industries. The survey identifies post pandemic hiring and retention trends in the first half of 2021, providing employers with the data and insights to navigate the turbulent labour market.
In 1H of 2021, 69% Singapore companies reported an increase in turnover (69%) compared to the same period in 2020. At the same time, companies are also seeing a surge in hiring (72%) due to a rise in replacement hiring (51%), business expansion (30%) and the opening of roles which were previously on hiring freeze (15%).
“While there is a tendency to rely on financial incentives to compete for talent, it is not sustainable in the long run and can lead to wage inflation and pressure on margins,” says Mansi Sabharwal, Reward Products Leader, Mercer, Singapore.
“While money appears to be a quick and easy solution, the combined effect of premiums being paid to hire replacements and ad-hoc base pay corrections to retain talent will likely boost people costs for employers and without any material gains in productivity, this will pose a big concern for many organisations in the long run.”
In 1H, nearly 7 in 10 respondents have reported a rise in turnover with an average of 23% increase in attrition across all levels from staff to middle management as compared to 2020.
According to the survey, employees are leaving their jobs for three key reasons. 34% of organizations who have seen an escalation in turnover reported an increase in competitor poaching, offering higher salaries and enhanced benefits, while 17% say it is a result of foreign talent leaving the country. Another 13% cited increased workload.
To retain talent, 44% of respondents made mid-year pay adjustments outside of usual annual salary review cycle. Among those who provided adjustments, 75% of companies increased base pay for selected employees. Others gave lump-sum retention bonuses (14%), higher allowances (7%) and increased performance bonuses (4%).
Ms. Sabharwal adds, “While salary adjustments and bonuses can temporarily relieve the pressure now, companies should be taking a holistic view of their value proposition for employees. To do this, they should invest in employee wellbeing, employee listening, career advancement opportunities and training to upskill their talent.”
Seven in 10 companies in Singapore reported increased hiring activity in the 1H of 2021. To attract talent, 56% of Singapore companies are offering increments of 15% or more in higher base salaries for new hires across management, professional, support staff and skilled trade worker roles.
43% of companies also reported increased starting salary for fresh graduates across most qualifications. Based on our survey, the lowest starting base salary for graduates with bachelor degrees is at a median of SGD42,000 as compared to SGD40,300 reported last year.
“In a few instances, we saw companies giving up to 90% higher base salary to attract and recruit new talents. We are also aware of companies providing employee referral bonuses as well as enhanced reward packages to differentiate themselves in the war for talent. Employers are also replacing talent at lower levels in an attempt to groom and nurture them into future leaders,” says Ms. Sabharwal.
While compensation is a critical component of an overall HR strategy to attract talent, companies need to think beyond pay to avoid disrupting internal parity, she adds.
“Today’s employees are as driven by company culture, work-life balance, progression opportunities and flexibility as they are by salary. Employers need to look at sustainability and address not only the financial, but also the physical, mental and emotional needs of employees.
“Forward-thinking companies are turning to non-monetary measures such as enhanced employee engagement, flexible working arrangements, training/upskilling, job enrichment and job re-design. The future of work only begins when employers make work more engaging and rewarding for employees. Simply throwing money across all levels and roles may cause cost pressures. Salary differentiation for specific skills sets, high performers or critical roles will result in a more balanced approach to pay,” says Ms. Sabharwal.
Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s more than 25,000 employees are based in 44 countries and the firm operates in over 130 countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 76,000 colleagues and annual revenue of over $17 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer.